During a question and answer session at a recent industry conference, a home builder asked Moody’s Analytics chief economist Mark Zandi for his thoughts about the labor
Boomers' Downsizing Dilemma
Baby Boomers' motivations and purpose for downsizing must be understood because they aren't always what they appear to be
One of the potential bright spots on the custom-building horizon is the fact that many baby boomers will be looking to downsize over the next 10 years. Because many of them have owned their homes for a long time, their equity is still substantial even though the huge, unrealistic run-up in values is gone.
In the past, when I have built for boomers and empty nesters — including myself — I have seen predictable scenarios play out. The answer to the “downsizing dilemma” encompasses four distinctive parts. Let's take them one at a time.
Physical. This is the primary motivator for most people; a smaller lot, a smaller home, low maintenance and one-level living are their desires. Builders can get trapped by this because although the smaller lot is usually not a problem, building what clients require is difficult to achieve in a smaller home. The fewer, smaller rooms in your design will quickly be questioned even though it is counter-intuitive (“Where will the kids stay?” “My dining table and hutch won't fit,” etc.). Be ready with alternatives other than just adding more square feet.
Financial. Downsizers will automatically assume there will be a dollar-for-dollar reduction in cost based on the size of the new home versus the old home. We all know it just doesn't work that way, and we have to explain this early and often to prospects, especially in the current market where costs to build have not declined but existing home prices have. Ranch homes and homes with main-level master bedrooms are more expensive to build per square foot than the two-story homes many of them are leaving. Plus, the incremental cost of the last 1,000 square feet built is substantially less than the first 1,000 square feet. As a rule, smaller homes are more expensive to build on a per-square-foot basis. And clients are probably loading the new home up with all the higher-end finishes they didn't have before. Explain these “facts of life” before they rear their ugly head.
Emotional. The emotional impact of leaving the “family home” can create some real problems for a builder. Many things in the new home will be compared unfavorably to what was in the old one, even though the clients have overlooked its flaws and shortcomings for years. Add this emotional tug to the normal stress of building and you have a potential problem client. Constantly reassure them that this will be the place where new memories are made, and remind them of the features that will make living there easier.
Social. If your clients are drastically downsizing, make sure you understand the backward step in perceived status they are taking. Many people have much of their self-worth wrapped up in their homes, and downsizing can begin to feel like downgrading to them. Once again, consistently reassuring them they will love their new home and its lower maintenance and costs will go a long way to help manage their feelings.
Baby boomers' motivations and purpose for downsizing aren't always what they appear to be. Keep the above points in mind as you prepare to build for this demographic.
|Nationally recognized speaker and trainer Tom Stephani, MIRM, GMB, MCSP and CAPS, specializes in custom homes; infill housing; light commercial projects; and developing commercial and residential land. You can reach him at firstname.lastname@example.org.|